But eMudhra wanted to (was required to) export the keys.
So using an HSM in the first place is a security theater. Or that this HSM isn't really an HSM since it allows for export of the private key.
The trusted enclave in a MacBook is more secure than this HSM.
Most HSMs used by CAs are pretty trash tbh.
There is something called "wrapping/unwrapping" - you encrypt the key, move it to the other HSM, and it unwraps it. So what moves around is encrypted. I don't know enough about HSMs to tell you if it's done using symetric or asymetric crypto, but no the key should not move around in the plaintext.
The write-up from eMudhra mentions something about wrapping/unwrapping ceremony failing.